- German court dismisses complaint against European rescue fund
- 37,000 citizens had sought to stop the fund going ahead
- Critics said the fund would expose German taxpayers to excessive demands
- Supporters say the European Stability Mechanism is vital to saving the euro
(CNN) -- The eurozone's crisis plan passed another milestone Wednesday with the decision from Germany's Constitutional Court to dismiss a complaint against Europe's permanent bailout fund, known as the European Stability Mechanism.
The decision eases the pressure on two of the eurozone bloc's largest economies, Italy and Spain, whose funding costs have been soaring amid a financial crisis that has dragged on for more than two years.
The two countries -- the bloc's third- and fourth-largest economies, respectively -- are considered too big to fail, but Spain has already been forced to seek financial aid for its banks and is widely expected to seek further assistance.
Anatoli Annenkov, senior European economist at Societe Generale, said the verdict showed that on paper, "we now have some powerful tools available which combined looks sufficiently large to deal with financing pressures on Spain and Italy, if and when they arise."
That may "be sufficient to calm markets," Annenkov said, although he noted that the plans needed to be quickly translated into practice, with full details of conditions and enforcement made clear. "We expect the first real case to be Spain, which is currently studying the conditions for applying for aid," he added.
The decision, which was months in the making, was expected but clears the way for the introduction of the European Stability Mechanism, which is due to become operational in October and will have a maximum lending capacity of 500 billion euros. The ruling included conditions to limit Germany's liability to the fund to 190 billion euros.
In Germany's biggest ever constitutional challenge, about 37,000 citizens had tried to block the fund, saying it violated the country's right to retain control of its own budget.
The citizens, who backed a legal push from the More Democracy movement, said the mechanism could expose the country to unlimited demands for taxpayer money. They wanted a referendum to decide the issue.
Supporters of the rescue fund, including German Chancellor Angela Merkel, said it was a vital part of measures to prop up ailing European economies and avert the collapse of the euro. Addressing German parliament Wednesday, Merkel said: "It is a good day for Germany, it is a good day for Europe."
Markets rose on news of the ruling, as investors had been anxious about how it would affect the European Central Bank's plans to preserve the euro.
It was feared that a negative ruling would throw global markets into chaos and force Europe's politicians to return to the drawing board to tackle Europe's debt crisis.
The bailout fund is set to provide financial help to European countries struggling to cope with their debt burdens.
It's an integral part of a plan announced by European Central Bank President Mario Draghi last week to buy bonds with a duration of between one and three years.
The bond purchases, described as "outright monetary transactions," would be available to countries that seek outside help and that agree to meet a number of budgetary conditions before approval. There would be no "ex ante limits on the size" of the purchases, Draghi said, repeating his pledge to do "whatever it takes" to save the euro.
The measure is designed to keep a lid on bond yields and borrowing costs.